Chile’s peso dropped to a 16-week low on speculation U.S. budget wrangling will weigh on global economic prospects and sap demand for emerging-market assets.
The peso depreciated 0.2 percent to 484.79 per U.S. dollar at the close in Santiago, the weakest since July 26. The currency declined 1 percent this week, its biggest drop since the five days ended Oct. 26.
Investors sought refuge in the dollar after the opening round of talks today between President Barack Obama and congressional leaders to avoid $607 billion in tax increases and spending cuts, known as the fiscal cliff. The U.S. is Chile’s biggest export destination after China. Copper, which makes up most of Chile’s exports, traded at almost a two-month low.
“Markets haven’t stopped falling, and that has dragged down commodities and currencies as well,” said Eugenio Cortes, the head of currency forwards at EuroAmerica Corredores de Bolsa in Santiago. “The Chilean peso is no exception. The market is concerned about everything Obama faces in negotiations with the Republicans and the tax rises. An increase in taxes would be a strong blow to the U.S. economy.”